Recent headlines can give the impression that the inflation crisis is over. Indeed, many market watchers expect inflation to return to well within the Bank of Canada’s one to three per cent target range in the coming months.
This does not, however, mean that prices are going back down to where they were in 2019.
Inflation is about the rate of change of prices overall, not the absolute prices of specific goods. A bag of groceries that cost $100 in Whitehorse in 2019 now takes $116 out of your wallet. With the Bank’s one to three per cent target, it is not trying to get those groceries back to $100. It is just trying to manage future price increases into that range. If that bag of groceries only costs between $117 and $119 next year, and everything else goes up a similar percentage, the Bank will be happy.
What this means is that, since the pandemic, every Yukoner played their own version of the inflation game. Whether you won or lost depends on what mix of products you buy. Volatile inflation threw thousands of prices up in the air like flakes in a snow globe, and now they are settling back down at different levels. As are the wages Yukoners use to pay the new prices.
However, snowflakes in snow globes always settle back down on the bottom of the globe. Since most prices are now higher than 2019, the inflation snow globe is one where the floor keeps ratcheting higher.
From 2019 to April 2024, the average price level in Whitehorse rose 16 per cent (all figures are for Whitehorse during that period, since Yukon-wide inflation figures are not available). Meanwhile, average weekly earnings went up 21 per cent.
This means the average Yukon worker actually has more spending power now than in 2019.
However, since few people match the average, let’s look at how individual Yukoners could have won or lost the inflation game.
Here’s how to play. First, figure out your inflation-adjusted wages. Go back to your last 2019 pay stub and compare it to this April. Suppose your take-home pay was $1,000 per week in 2019 and it’s $1,210 now. This would mean you are up 21 per cent like the average Yukoner. Since prices now are 16 per cent higher than in 2019, that sounds good.
But you don’t get any points in the inflation game for that. You now have to figure out what happened to your personal basket of goods.
Let’s look at the three big categories of housing, energy and food as well as a few less important items on your monthly credit card bill.
For housing, give yourself two points if you have paid off your mortgage or are nearly there. Give yourself one point if your take-home pay went up more than 26 per cent, the average for all kinds of shelter. If housing costs went up more than your pay, you unfortunately score zero.
For home heating, gasoline and diesel, give yourself two points if you walk or bike to work. Add another point if you heat your house with wood you chop yourself, but not if you pay skyrocketing cordwood prices to your favourite chainsaw artist.
If you buy heating oil, propane, gasoline or diesel, give yourself one point if your pay went up more than the 32 per cent we saw in the “energy” category. Same if you heat with electricity. If you thought you were escaping Big Oil by switching to electric heat, Statistics Canada says electricity inflation in the Yukon was 33 per cent over the period.
For food, you get one point if your pay went up more than 16 per cent. If you scored zero here, you can get half a point back if you significantly changed your food buying habits to cheaper products. For example, chicken only went up 1 per cent and fresh vegetables just 7 per cent. On the other hand, coffee and tea were up 19 per cent. And butter, whose producers are protected by Canada’s supply management system, saw prices go up 27 per cent. Cheese went up 22 per cent.
After the basics of housing, heat and food, which everyone needs, it gets more complicated. Inflation affected prices differently, which means a senior spending a lot on eyeglasses and prescription drugs will fare differently than a young couple buying appliances and household goods for their new home.
There are also big differences between goods and services. Goods are often produced in huge factories in low-wage countries, while services are delivered by Yukon businesses dealing with labour shortages and higher wages.
So eyeball the following list, and give yourself a quarter point if you buy the following products and your pay beat inflation in that category:
- Internet access: -4 per cent
- Home entertainment equipment: -3 per cent
- Household cleaning products: 13 per cent
- Household furnishings: 19 per cent
- Clothing and footwear: 8 per cent
- Non-prescription medicine: 26 per cent
- Travel services, such as hotels: 28 per cent
- Reading material: 14 per cent
- Booze: 10 per cent
- Cigarettes: 28 per cent
If you like to sit in your mortgage-free basement binging YouTube on your new big screen while enjoying a drink, inflation has been kind to you. Not so much if you are a renter who likes to travel and smoke.
The biggest fault line between winners and losers is housing. Those with the fewest assets were hit hardest by housing inflation. This is why so many politicians and pundits on TV seem to have been surprised by the recent wave of affordability angst. Most of them make more than the average wage, and are often of an age where they own their own homes and are either mortgage-free or close to it. So sticker shock in the grocery store is less visceral than a young worker on a flat hourly wage who rents a place at current market rates.
The second biggest fault line is Cost of Living Adjustments, also known as COLA clauses. If you work for government or a big company where your wages rise automatically with inflation, count your blessings. Even if higher prices for some products outpace your COLA, you are still far better off than workers whose wages are lagging inflation by several years.
The good news, such as it is, is that the period of severe inflation seems to be behind us. That $100 bag of groceries is not coming back, but at least it should be a while before it costs $200.
Keith Halliday is a Yukon economist and the winner of the 2022 Canadian Community Newspaper Award for Outstanding Columnist. His most recent book Moonshadows, a Yukon-noir thriller, is available in Yukon bookstores.
